news ST. PAUL - Minnesota's senior congressman fears the Obama administration has fired a shot over the ethanol industry's bow in seeking a home-grown fuel for the Navy.
"I think that is a big a problem," said U.S. Rep. Collin Peterson, who serves most of western Minnesota.
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2013-01-28 11:51:48

ST. PAUL - Minnesota's senior congressman fears the Obama administration has fired a shot over the ethanol industry's bow in seeking a home-grown fuel for the Navy.

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"I think that is a big a problem," said U.S. Rep. Collin Peterson, who serves most of western Minnesota. "It is just another competition for us in ethanol that we don't need really."

Peterson, the top Democrat on the House Agriculture Committee, said in an interview that the plan administration officials announced this week probably will not work and threatens Minnesota's 21 ethanol plants.

Christina Connelly, bioenergy manager of the Minnesota Agriculture Department, said details of the plan were vague, but she did not see a conflict between existing ethanol plants and the proposal.

In his Monday visit to Cannon Falls, Minn., President Barack Obama indicated he wanted to start weaning the military off fossil fuels.

"The Department of Defense uses a lot of fuel, so the question is, can we get trucks and Jeeps and, in some cases, even fighter jets running on alternative fuels, which is important for our national security but also could provide an incredible boost to communities all across Minnesota, all across the country?" Obama said.

The next day, three top administration officials announced they came up with $510 million to help businesses to begin producing plant waste-based fuels for the Navy. The Navy secretary set a 2020 goal of half of all Navy fuels coming from plant material.

The former Agriculture Committee chairman said he has lobbied Energy Secretary Steven Chu against the plan for two years.

Technologically, the new fuel can be produced, Peterson said, but it would take expensive on-going government support to produce the fuel.

Chu's idea is to produce a "drop-in fuel" that would totally replace traditional fuel. That is unlike today's corn-based ethanol and soybean-based biodiesel, which are blended with gasoline and diesel.

The cost to build production plants to make the fuel and to keep them going would be prohibitive, Peterson said.

"It basically takes a refinery," Peterson said of making the new fuel. "It is not realistic to add a refinery to an ethanol plant."

If an ethanol plant cost $200 million to build, the congressman said, it would take another $300 million to retrofit it to produce drop-in fuel.

At the same time, production would be just two-thirds what the ethanol plant produced.

Chu, Agriculture Secretary Tom Vilsack and Navy Secretary Ray Mabus said their three departments' investment in the project would make the fuel economically feasible for civilian use.

They could not say where production plants would be built, but Mabus predicted they would be across the country.

"There is no Navy in Minnesota," Peterson said. "So there is not going to be any market that is close enough to us to do any good for us."

Another problem the congressman sees is buying plant material that would be turned into the new fuel.

Materials such as wheat straw that Obama administration suggests as raw material is not available in places where the plants likely would be built, Peterson said. And, he added, farmers providing the material likely would charge $65 a ton, but $35 a ton probably is the most a production facility could pay and still make a profit.

"You have another government subsidy that probably will be required for at least half of the cost of a feedstock," Peterson said.

Ethanol, the most-used biofuel, mostly comes from corn today. It has been under fire recently for taking corn out of the food chain, using too much water and other problems.

Those problems have steered potential investors away building ethanol plants that use plant waste, leaving the government as the main funding source.

The federal plan likely will end up benefiting oil companies that take advantage of the federal funds, Peterson said, "because that is what they do." The ethanol industry began at the farmer level and farmers still get most of the profits.

"By building a national biofuels industry, we are creating construction jobs, refinery jobs and economic opportunity in rural communities throughout the country," said Vilsack, a former Iowa governor. "As importantly, every gallon of biofuel consumed near where it is produced cuts transportation costs and, for the military, improves energy security."

The federal government will accept "all of the risks associated with growing" the new industry, Vilsack said, the first time that has happened.